BIR clarifies tax incentives for skills programs

The Bureau of Internal Revenue (BIR) has clarified how companies can claim tax incentives under the Adopt-a-School Program and the Enterprise-Based Education and Training (EBET) framework, aiming to resolve confusion over deductions and eligibility.

Issued on 30 March, Revenue Memorandum Circular (RMC) No. 23-2026 explains that under the EBET Act, only registered enterprises—not academic institutions—can implement EBET programs. 

The term “technical-vocational institutions” (TVIs) in previous regulations refers exclusively to these registered enterprises.

The circular also details how companies may compute additional deductions for training expenses. Until the end of 2027, businesses can deduct 150 percent of actual training costs—100 percent actual expense plus a 50 percent additional deduction. 

Beginning 2028, the additional deduction rises to 75 percent of training costs but is capped at 5 percent of total direct labor expenses or P25 million annually, whichever is lower. 

Only expenses directly incurred by the enterprise qualify; third-party scholarships are excluded. Unclaimed incentives cannot be carried over to the next taxable year.

RMC 23-2026 further clarifies that tax incentives for the Adopt-a-School Program and EBET are mutually exclusive. Companies can only claim one type of deduction per specific expense or donation. 

Under the Adopt-a-School Program, contributions to public schools are deductible from gross income, plus an additional 50 percent incentive. 

Donor’s tax is waived, while value-added and excise taxes on imported donations are borne by TESDA or the Department of Education, depending on the nature of the contribution.

The move aims to encourage private sector participation in both programs to modernize schools and align workforce skills with industry needs. “These clarifications provide clear guidance for enterprises seeking to support education and training while maximizing allowable tax benefits,” the BIR noted.

By providing clearer rules on eligibility, deductions, and program boundaries, the BIR hopes to make it easier for companies to contribute meaningfully to education and workforce development in the Philippines.